Senator Isakson and Rep Graves (both from GA) have introduced a bill that would allow homeowners to withdraw up to $50,000 or 50% of your 401(k) balance, whichever is less, penalty-free from their 401(k) to make payments on their mortgage. Payments to the mortgage must be made within 120 days of the withdrawal and taxes (at the homeowners' marginal rate) would still be due.

So we are basically trying to deal with a "housing crisis" by exacerbating the coming "retirement crisis." Got it...

Exactly.

If you look at the 'short title' of the bill at the bottom of page 1, you can get an idea of the magical thinking that is going on:

This Act may be cited as the "Hardship Outlays to protect Mortgagee Equity Act of 2011" or as the "HOME Act of 2011"

Ummm....if there were any 'equity' to protect, the house could be sold, completely relieving the homeowner of having to make the mortgage payments without raiding the 401(k). Instead, Congress seems to be encouraging people to raid the small amount (in comparison to what will be needed) that has been saved for retirement to try to fill in the black hole of having 'invested' in a home that has gone down in value.

I doubt that most houses will go back up in value enough to fund retirement, if the retiree is even willing to sell said house (which many seem to be reluctant to do).

FuskieWho notes our Governor passed a law cracking down on illegal immigration and is now dismayed that a large number of the state's farming community are facing failure now there are not enough laborers in the fields...

Personally, I don't see this measure as being very meaningful. Its mostly one of those token measures that lets politicians claim they are doing something.

1. It is difficult to image people losing their houses to foreclosure while they still have assets in their 401Ks. Most will tap those assets at any cost if they think it will save their homes. The 10% penalty is not much of an impediment.

2. The measure gives people yet another method to tap their 401ks. But those who are determined to get their hands on those funds usually succeed--sometimes for the dumbest reasons.

The moral discussions are largely theoretical in my view. In the real world, it matters little.